Doing the Right Thing: The Effect of Rotation Policies on Managers' Reports about Operational Distortion

44 Pages Posted: 16 Aug 2016 Last revised: 30 Apr 2020

See all articles by Eddy Cardinaels

Eddy Cardinaels

Tilburg University - Tilburg University School of Economics and Management; KU Leuven

Bart Dierynck

Tilburg University

Victor van Pelt

WHU - Otto Beisheim School of Management

Date Written: April 30, 2020

Abstract

Operating distortion causes inefficiencies in performance measurement systems and typically remains hidden in firms’ operational layers, unless managers report its occurrence. One obstacle to managers reporting operating distortion is that they often benefit economically from remaining silent about it, which causes them to morally disengage from the reporting decision. In this study, we examine whether the prospect of rotating to another business unit decreases moral disengagement among managers and induces them to report more of the operating distortion in their current business unit. Results from our experiment support our prediction and confirm that the prospect of rotation decreases the likelihood that managers will morally disengage from the reporting decision. Our study contributes to research on operating distortion and managerial reporting and has important implications for firms looking to resolve inefficiencies in performance measurement systems in business units.

Keywords: operating distortion, rotation, reporting, moral disengagement, performance measurement systems

JEL Classification: C92, M40, M41, M54

Suggested Citation

Cardinaels, Eddy and Dierynck, Bart and van Pelt, Victor, Doing the Right Thing: The Effect of Rotation Policies on Managers' Reports about Operational Distortion (April 30, 2020). AAA 2017 Management Accounting Section (MAS) Meeting, Available at SSRN: https://ssrn.com/abstract=2823059 or http://dx.doi.org/10.2139/ssrn.2823059

Eddy Cardinaels

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Warandelaan 2
Tilburg, 5000 LE
Netherlands
+31 134668231 (Phone)

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/?uid=e.cardinaels

KU Leuven ( email )

Naamsestraat 69
Leuven, B-3000
Belgium
+32 16326984 (Phone)

HOME PAGE: http://www.kuleuven.be/wieiswie/nl/person/00013472

Bart Dierynck

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Victor Van Pelt (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

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